The new Dutch transfer pricing guidance, what has changed?

By Jian-Cheng Ku & Robin Theuns, DLA Piper, Amsterdam

The Dutch State Secretary of Finance, on 22 April, issued updated guidance reflecting positions to be taken by Netherlands tax authorities concerning transfer pricing matters.

The new guidance outlines the State Secretary of Finance’s interpretation of the arm’s length principle and reflects the Ministry’s views on amendments made to the OECD Transfer Pricing Guidelines in 2017 as a result of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

The new guidance, among others, includes:

  • Clarifications to the process of characterizing transactions between related parties;
  • Clarifications to the application of certain transfer pricing methodologies;
  • Amendments to earlier guidance pertaining to the pricing of intangibles when values of these intangibles are highly uncertain at the time of valuation;
  • Inclusion of a new paragraph on hard-to-value intangibles;
  • Inclusion of a new paragraph on the acquisition of shares in third-party companies followed by a business restructuring;
  • Inclusion of a new paragraph on remuneration for so-called low value-adding services;
  • Textual amendments to better align the terminology used in the Dutch transfer pricing guidance with the 2017 OECD Transfer Pricing Guidelines.


While the guidance has a 12 May effective date, the State Secretary of Finance states that to the extent the changes and additions to the guidance are clarifications and interpretations of the arm’s length principle, these sections should apply retroactively.

Unfortunately, however, no clarification is provided on which parts of the new rules should be considered ‘new guidance,’ and which parts are considered ‘further clarifications.’

Substance over form

The guidance indicates that a ‘substance over form’ approach is to be applied when characterizing intercompany transactions.

Legal agreements between parties generally do serve as the starting point for analyzing intercompany transactions; however, the guidance explicitly emphasizes the importance of analyzing the actual conduct of parties, analyzing which parties ultimately control the risks assumed, and verifying which parties have the capacity to bear such risks.

Attribution of profits derived from IP

 A large portion of the guidance focuses on the attribution of profits derived from intangible property (IP). Reference is made to so-called DEMPE functions,’ i.e., performing functions, using assets or assuming risks in relation to the developments, enhancement, maintenance, protection, and exploitation of intangibles.

The guidance states that when attributing profits derived from intangibles, the focus lies with the development and the enhancement functions.

Hard-to-value intangibles

 With respect to transactions relating to IP for which no reliable comparables exist and where values are highly uncertain at the time of valuation, the guidance states that the actual, retroactively determined, results may be used by the Dutch tax authorities to challenge the arm’s length nature of positions taken by taxpayers, if (i) large deviations are identified which (ii) cannot be explained through circumstances occurring post-valuation.

‘Large deviations’ is defined as deviations from prior forecasts exceeding 20% within a period of 5 years after income is derived from the IP.

Business restructurings

 The guidance mentions that documentation on pricing applied by multinational organizations in relation to the acquisition shares in third party companies is a reliable indicator of the valuation to be applied when such acquisition is followed by a transfer of the IP held by such company within the group (i.e., a business restructuring).

Low value-adding services

 Finally, the decree offers taxpayers a simplified approach for determining arm’s length charges with respect to low value-adding services through application of a mark-up of 5% over the allocable costs, substantiated by appropriate documentation and a suitable allocation key.

Among other things, this means that the process of applying for an APA with respect to these services will be more straight-forward since no benchmark study will be required.  

–Jian-Cheng Ku is a Tax Adviser with DLA Piper, Amsterdam. He advises on international tax law and transfer pricing with a particular focus on international tax planning, M&A and private equity transactions, corporate reorganisations, and planning and design of transfer pricing policies.

–Robin Theuns is a Tax Adviser with DLA Piper, Amsterdam. Robin advises on Dutch and international tax aspects relating to international tax planning, M&A transactions, corporate restructurings, private equity and investment fund transactions.

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